Most interesting is the fact that Wal-Mart added pravastatin (generic Pravachol), a $2.3 billion blockbuster for Bristol-Myers Squibb Co (BMY) in 2005. Sounds like The Empire Strikes Back scenario in which I predicted that the list would be broadened to include blockbuster generics. In an online poll, that scenario got 56% of the votes vs. 44% for Much Ado About Nothing. (I stopped the voting after two weeks, so last week’s news did not affect the results.)

According to Wal-Mart’s press release: “To date, as new states have been added to the program, 2.1 million more new prescriptions have been filled in those states as compared to the same time periods last year.” If true, then Wal-Mart is increasing its average number of scripts per pharmacy by about 20% per store. I suspect that incremental costs for this additional volume are relatively low at Wal-Mart, making the program a financial win.

So far, no one has any real data on which chain or format is being affected by Wal-Mart. Most obviously, cash pay customers will switch first. Chains appear less vulnerable because customers with third-party insurance may not save very much versus standard co-pays.

However, chains are now in the awkward position of telling customer to ignore price, an argument that seems curiously at odds with the trend toward consumer-driven health care decision making. Walgreens (NYSE WAG) took the bait and issued a bizarre press release telling customers to focus on “convenient locations, close-in parking and unique pharmacy services.” Ouch. How long until CVS Corp (CVS) or Walgreens cave in and lower their generics margins? PBMs also risk a margin squeeze if payers question their generic dispensing profits versus Wal-Mart.

Bottom line: I stick by my prediction made when the plan was first announced in September: Wal-Mart's Generic Pricing Will Trigger Big Changes. My two criteria for the magnitude of the near-term impact were (a) how well Wal-Mart rolls out the program, and (b) how quickly (if ever) they include more mainstream generic products. (See Reconsidering Wal-Mart -- but just a little.) The national roll-out has been very fast. I predict generic Zoloft and Zocor are not far behind.

I'm not sure. However, Wal-Mart is challenging the generic margins of retailers, which is an especially vulnerable area for pharmacy chains. Consumers iwth good third-party coverage have little incentive to switch and will probably find Walgreens and CVS more convenient. But I do wonder if the chains will be forced to blink and lower prices.

It has appeared to me that the chains have made most of their profit in the generic end of the business over the past few years. On brand drugs, the inventory cost is high and the % profit is very low which is opposite of the generics.

Pharmacist salaries are at a historic high and the chains keep adding stores/pharmacists. It is beyond me how they will make enough profit (0nce generic profit is decreased)to keep expanding stores. I predict a consolidation and store closures and a rush to in-store dispensing automation. There is a fair amount of dispensing automation on the market now to allow stores to increase volume with no increase in number of staff.

You know, it's not as if I do not want to save money on my perscription medication, however, what matters most to me is Customer Service. Something Walgreen's left behind ages ago. I should know, we have three stores within 20 miles of each other and I have tried each and every one of them. They have all fallen fall short of the acceptable Customer Service mark. Something Walmart seems to have gottent the hang of and should in my humble opinion exploit more than they do in their marketing.

You go to Wal-Mart and the individual's behind the Pharmacy service counter are happy to see you, happy to serve you and do not complicate your life. Walgreen's on the other hand seems to be infected one to the other, with an unhappy service support staff and they pass that attitude on to their Customers. I have taken my complaints so far as the Regional Managers, with no satisfaction and have only found a pass-the-buck attitude.

So in short, go Wal-Mart, good for you, I wish you the best and greatest succes, but only hope that they continue to keep their level of Customer Service to a higher standard than the other five (5) other Pharmacy options locally.

Adam, I really enjoy reading your blog. Very informative and almost always timely. Keep up the good work. Second, I saw some news from/about Costco this morning that I thought was interesting…

Costco's (COST) decision to no longer match Wal-Mart's (WMT) $4-per-30-day-prescription promotion on generic drugs is a positive development for pharmacy benefit managers, analysts say. WMT's program has weighed on shares of PBMs, such as Medco Health (MHS), Express Scripts (ESRX) and Caremark (CMX). COST's move "represents a tacit admission that the relatively high cost of dispensing...does in fact make the promotion a loss leader, and one that increased sales in the rest of the store cannot justify"

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